Demutualisation, Strategic Choice, and Social Responsibility

Abstract

The demutualisation of British building societies The paper examines the demutualisation of British building societies, the trend during the 1990s for these mutual financial institutions, run on behalf of their members and without external shareholders, to convert to public limited companies (plcs). It also explores the policy implications of the decision of the New Labour government, despite its strong roots in the cooperative and mutual social movements (Yeo, 2001), to ignore the erosion of the mutual business sector (Treasury Select Committee, 1999a; 1999b; 1999c). The paper is based on an extensive interview survey of senior building society management and a wider study of retail financial services (see appendix). At the level of political and social values, mutuality is a doctrine that stresses mutual interdependence as the means of promoting collective well-being. Thus, following Halsey, mutuality can be seen as a``sense of common citizenship that leads people not to press too far their claims for personal liberty (in particular the liberty to hold very unequal wealth) and to agree on a certain amount of basic equality of condition among citizens'' (Halsey, 1978öquoted in Birchall, 2001, page 3). As operationalised at the institutional level in building societies, mutuality is a particular form of ownership that eliminates an important stakeholder, the investor-owner, in favour of the customer who becomes the user and joint owner of the business. Mutual ownership provides one means of dealing with the so-called`agency problem' faced by all complex organisations where there are a number of different stakeholders (for example, managers, owners, customers, and workers), and where the issue is which of these will shape the goals of the organisation and the way in which the costs and benefits are shared out. Ideally, in mutuals, where managers (in theory at least) respond to their members, and do not need to meet the demands of a separate group of investors with different priorities, the organisation can more readily espouse political^social forms of mutuality. This is certainly the view of political commentators such as Kellner (1998),

Understanding and combating mission drift in social enterprises

“…Historically, there are many examples of cooperatives and mutual organisations that were established for the benefit of their members that have demutualised or been taken over by capitalist firms. In the UK the demutualisation of many building societies is a classic example (Marshall, 2003). In the US the takeover of the Ben and Jerry's by Unilever is another high profile example (Page and Katz, 2012).…”

Handbook on Hybrid Organisations

“…There has been a concern that traditional legal forms that businesses commonly adopt do not provide adequate protection for a social enterprise's social mission, leave them vulnerable to takeover by other businesses that do not share their social mission, and provide inadequate means of accountability to other stakeholders beyond owners or shareholders. In the UK the demutualisation and takeover of many building societies by private sector banks is a classic example (Marshall et al, 2003). In the US the takeover of Ben and Jerry's by Unilever is another high-profile example.…”

Geographies of corporate philanthropy: The Northern Rock Foundation

“…Interview Evidence: Seven face-to-face interviews with senior managers at Northern Rock and its Foundation were conducted over almost 20 years. In 1996, an interview with senior management at Northern Rock was part of exploratory research on the building society industry (Marshall et al, 1997), and a further interview with the company was included in an investigation of demutualisation in 1998-1999 (Marshall et al, 2003). The latter study included face-to-face interviews with senior management in 31 of the 70 building societies established at that time accounting for 88% of the assets of the sector.…”